What Is "Dysfunctional" Here?

In the eyes of those who run financial markets - not just in the US but all over the world - a “dysfunctional” government is one which puts any impediments whatsoever on unlimited credit creation. Given the $US hundreds of TRILLIONS of “derivatives” extant, any such “limits” or even the thought that there ARE any limits is dangerous in the extreme. These same “markets” get awfully nervous when there is any discussion about “limits” to the issuance of US Treasury debt because that same debt is the ONLY underpinning for the US Dollar which is in turn the ONLY underpinning for the global financial system.

To understand the ludicrous nature of what now passes for “fiscal management” in the US or anywhere else, consider an example. At present, China owns about $US 1.2 TRILLION “worth” of US Treasury debt paper. Imagine if you will the reaction from the Chinese government if Mr Obama ordered his Treasury to mint a platinum coin weighing (let’s be generous) 100 troy ounces with a denomination of $US 1.2 TRILLION. Having received this beautiful, bright and shiny new coin. Mr Obama then stuffs it in his briefcase, jumps aboard Air Force One and directs the pilot to head for Beijing. Upon landing, Mr Obama drives to the Great Hall of the People. He then requests and is of course granted a meeting with the Chinese Premier. Mr Obama then plunks his briefcase down on the Premier’s desk, extracts the coin, hands it to the Premier and declaims with a huge smile: “There you go - we’re even!” “I’m off to Tokyo now. I’ve got another one just like this one for them.”

Nobody could take this seriously, except an almost terminally dysfunctional government. Sadly, that’s the kind of thing that the markets are counting on and have been counting on for years.

I have no idea as to the point of that article. There can be no limit placed on the creation of credit, as that can be done by contract. The amount of the US credit system what we know as the federal reserve system must be allowed to expand as what would you service the prior credit with?

We are completely debt free, and we have secured a debt free existence for our children. We will never need to purchase a new home or car or anything else on credit. We have become fanatical about it. If we can't pay outright the purchase is not made.

If 20 or 30% of the West could do this the financial-corporate complex would collapse.

When I first heard of the trillion dollar platinum coin meme, I thought it was a joke. It is a joke, but it keeps coming back as something viable. Since the assignment of dollar value is arbitrary, I say we should make it a 2oz coin (or 200oz), worth $2 trillion. That way, the Chinese can figure out how they are going to pay us back $1 trillion that they owe us.

If you cannot pay, China, we will happily accept more of your cheap goods as collateral. It's a pleasure doing business.

"Nobody could take this seriously, except an almost terminally dysfunctional government."

on the other hand, everybody could take it seriously if the treasury issued 1 or 16 or 80 or 400 trillion in fiat coins for deposit at the fed, then drew on that "account" and remitted (electronically) them as "actual" "dollars"

No, they are not. The Chinese have a problem, what can they get with their depreciating dollar assets? The answer of course is hard goods. Gold. Mines. Ag land in LatAm and Africa. Oil companies.

(Actually that is not a bad idea for each of us, buying gold...)

Complex societies with lots of debt and opaque undercurrents are almost exactly the definition of a fragile system. N. N. Taleb writes in his new book Antifragile that you cannot predict the furture, but you can assess risks to most systems, whether fragile (bad), robust (OK) or antifragile (systems that get stronger under stress, best).

Explore with me some further ideas of his (or BTFB! and come exploring...):

Dollars cannot be left with legitimate nuclear powers. The ramifications are too serious. Once the dollars are in the hands of more 'pliable' regimes the process of devaluation can proceed in earnest. Then the countries that get stiffed can discuss things with whoever bought items that are located in the stiffed countries.

You are right DoChen. The main interest of the Chinese leadership of course is to retain power. They need to manage the revolution of rising expectations of their 900 million or so poorer citizens. And they are executing their plan reasonably well. Get as much real wealth/value as possible out of the USD hoard that they got for free by printing up Yuan while trying to reduce transaction costs/secure the benefits of a reserve currency position globally for that which they are printing up. It is all very logical.

Incidentally, one thing they will be needing more of in China is silver. Not widely known in the US but the authorities in China are planning a nationwide network of grid tied large scale PV generating plants in order to fill the capacity of local solar panel manufacturers who were subjected to much higher US import duties last year.

i hope the chinese read the hedge.....not that im enamored with the chinese...but gentleman and ladies what we have going now has got to be stopped...it is inhaling the entire planet,... so once we end this we can get back to a better sanity level...than we can fuck that up...

There's nothing anyone can do about it, the crash will happen. But fucked? No. Those who are aware can profit from all this. I honestly believe that there is no way to deal with this mess, it has already past a tipping point. Now it just has to get much worse. Only then people will come to their senses. It has been like that throughout human history, and since human behavior hasn't really changed, it will all happen again. Only this time it will be much more severe.

If the USA were creditworthy, this "$1T platinum coin" idea would be unnecessary. When will Treasury prices respond to these signs of desperation? The "full faith and credit" of the US Government, accepted by most buyers of Treasuries as an iron-clad guarantee, will not stir much more enuthusiasm for Treasury cram-down paper if politicians and pundits in the USA are attracted by the apparent "promise" of this market-mindless myth of the $1T platinum coin.

The moment they announce this coin is about to be minted for real, expect 1000 dollar gallon gas at the pump, 400 dollars for a loaf of bread, etc, etc. This coin would be an admission that the US has defaulted on its currency.

You give the world too much credit (pun intended). The sheeple won't get it.

I subscribe to the Privateer. (highly recommended, Bill Buckler is a genius). If you follow thru with the rest of the logic outlined by Buckler, they will do it, swear to never do it again, and use it as a mechanism to eliminate the debt ceiling forever. They have already floated the "no debt ceiling" idea and this will be the way that Oblama uses the system to force the Republicans into the no debt ceiling box. Brilliant.

Interesting theory. Watch, they will find a way to eliminate the debt ceiling. It is annoying to them.

Thats good humor, never do it again. The truth is, there is never enough spending for these people. They have infinite spending desires. As soon as they can get a work around to the debt ceiling, spending will explode and so will inflation.

I mean, why stop at one trillion dollar coin? Why not mint enought to fund the government so it could eliminate all taxation? Oh, thats right, taxation is nothing more than a conduit of control. But think about how bullish that would be for the economy if people could spend all of the taxes they pay to the governent on Ishit? They will mint more coins the second they have another wet dream spending project that they want to fund.

I agree... as a subscriber to the Privateer since the late 1990s. Ole Bill has helped me keep the PM faith in times of trouble and turmoil. It has gotten rough but I've managed to hang on the the metals.

FYI: I'll be going out later today in my newly repaired boat with all my holdings. Wish me luck.

No one should be allowed to work for the government for more than 8 years .... and only one employee per nuclear family .... stop the nepotistic, gov suck family dynasties .... at least expose them .... FOIA ? Hahahahahahahahaha !

No one should be allowed to work for the government for more than 8 years .... and only one employee per nuclear family .... stop the nepotistic, gov suck family dynasties .... at least expose them .... FOIA ? Hahahahahahahahaha ! Rake the muck at the bottom of socialism's cesspool .... including public safety employees !

Unbelievable! Is the economic intelligence of the average citizen really so stunted they can believe this solves anything? I welcome the entertainment value, and the it is great fodder for jokes, but are we serious here?

I wrote this before, but coins are useful money because the metal has intrinsic value. Coins usually start out having more-or-less the same face value as metalic value. So even if the government that mints it is untrustworthy, it doesn't matter because the coin's value travels with it. A coin cannot default even if the government does. Heck, even the copper in a penny is worth more than 1 cent.

Paper money, on the other hand, has essentially no intrinsic value, and takes its value from the fancy scroll work and numbers printed on it. It has no intrinsic value, its value is purely symbolic. It is an implicit promise to "make good on the face value, in some unspecified way, at some unspecified time in the future". It is a promise that depends on your trust in the entity that issued it. A dollar bill carries the "full faith and credit of the United States of America", which is what they mean. And its value derrives in part from its scarcity; the government has to be trusted not to print too many of them.

But notice how difficult it is for me to even diescribe what it is. Where is the value? It is totally symbolic and abstract. What is not abstract is that when you go to the store, they are happy to exchange your paper money for food. So you accept the whole premise. However, the value seemed much more real when you could exchange $35 dollars for an ounce of gold, even if you never did.

A $1 trillion coin that has something like its intrinsic value would be about 20,000 tons of Platinum (give or take). Think half a Titanic here. That's alittle cumbersome even for Barack! Since we have only mined about 10,000 tons in all of history, that is totally impossible. A 100 oz. Platinum coin with a face value of $1 trillion is much more like paper money than a coin. Again, its value is purely symbolic, an abstract promise.

What's funny is this is exactly what we do already, only we call them treasury bills. When we come up short buying all those BMW's from Germany, we just give them little peices of paper that "promise" to pay them back. Of course, they get paid back in "dollars" which are just another piece of paper with a different implied promise. When we don't have enough of them we just print more. The actual process requires several steps, but the end result is the same. So this idiotic $1 tirllion coin would just be a fancy treasury bill, with no coupon and no maturity date. Its value is just conjured up out of thin air, it's just another promise of 'repayment' in the future.

If the Germans, Japanese and Chinese are smart, they'll just take all those dollars and buy gold or platinum with it. Then they can make their own $1 trillion coins.

Any private party or gov can issue any form of specie .... Pt, Pd, Au, Ag, Cu. Kryptonite, Tungsten, etc. .... preferably in decimal fractions and known purities .... and no fixed values of or between the metals .... period .... world money is here already .... it's all around us .... for the using .... with a little freedom !

1: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

The current American Silver Eagle has a face value of $1. The reason is to prevent it from circulating. Its face value must be lower than its intrinsic (market) value of metal. The silver coins disappeared from circulation FAST when they introduced clad coinage in 1965. The nickel is on the way since its value (planchets + cost to produce + cost to distribute) exceeds its face value. Stock up. The U. S. has no economical way to recall and recover the metal from its circulating coinage (unlike Canada did). The law against melting nickels and cents will be overlooked after the introduction of the "new" nickel, and the cent if it survives at all. Why? The gov't would love it if the older coinage faded away quietly. Gresham's Law and all that. There is a method to all this madness -- just ask the Romans how that worked for them. Iron coins anyone? The problem is currency debasement, not anything else. All the rest is smoke and mirrors.

"These same “markets” get awfully nervous when there is any discussion about “limits” to the issuance of US Treasury debt because that same debt is the ONLY underpinning for the US Dollar which is in turn the ONLY underpinning for the global financial system."

Isn't an alternative to debt creation and QE a fairer and broader taxation model? Maybe the whole point of QE and similar "bailouts" has been to avoid increasing taxes for the 1 percenters and to avoid their having to take losses on bad investments. Has QE and bailouts shifted those losses and tax burdens onto the middle and lower classes?

It does seem like a lot of things have been designed to shift the tax burden, and shift wealth while hiding the long term effects. Remember the trickle down sell job we got? In reality wasn't that a trickle up and trickle out of the country in disguise? Please notice the embedded use of the word "Trick" (someone got big laughs on that I'm sure). A lot of money and investment, jobs and factories were offshored as a result, weren't they?

Uhm, excuse me.....Platinum is not "money" debt is you fucking Treasury retard. The fucking Chinks can continue to take our Jew confetti or don't. It's our debt/currency, but it's your fucking problem muchacos. Take it or leave it.

There is, of course, the little bitty problem that our "Jew Confetti" has value in international trade mainly through its position as global reserve currency which your so-called "Fucking Chinks" are doing their level best to interfere with by substituting their "People's Money" all around the world. "Leave it" won't feel very good when it finally happens someday.

Well unless The "Chinks" have a Blue Water Navy I don't know about that can police the Sea lanes and project power onto the Sand people to keep the price of Oil stable enough to engage in trade among nations it's gonna be a while before that day comes I guess. One aircraft carrier does not constitute a Blue water Navy.

Trying to enforce will by means of arms against the unwilling has worked out really well for the US over the last 50 years or so hasn't it? There is much less US public will behind a long term COIN project than there is in favor banning "assault weapons" at home these days. That's the land warfare reality.

Besides all it will take to disrupt the balance of your thesis is enough warheads that reach their targets in a naval chokepoint like, say, vicinity of Hormuz. Do you think those who oppose the continued position of "Jew Confetti" haven't been working on making this threat a reality?

When the "Jew Confetti" loses its position (and that seems to be the trend in play) there goes the capability for power projection. Seems to me it may not take that long to play out at all.

You know what douchebag? I hope your philosohy ain't apart of your investment thesis. Cause you are gonna go broke trying to short the USD. If you have not already. There is no preiminent contender for world dominance so good luck like I said.

You are right in one respect. I don't do well at foreign currency investment. So I stay away from it except for some prudent diversification in these "interesting times". You should stay away from the geopolitics, bro - it'll just make your brane hurt "preiminently".

Make my Brain hurt preiminently huh? What makes you think I have no knowledge of world history there ? I think I could hang tough with just about anybody out there when it comes to Geopolitics. I have no agenda so that makes me even more potent. Your "interesting times" are pretty much every fucking decade amigo. Until WW3 or the Return of Christ it will be" interesting times". Spare me and everybody the fucking Drama and let me know whats so interesting about our times? Other than the take down of Amerika by the Communists.

Drama? "Fucking Chinks"..."Jew Confetti"..."Amerika's being taken down by the Commies"...what I learned here is that Archie Bunker is alive and well! And here all this time Arch, I thought you was like, er, onna dem dere fictional characters, see.

the people of the world are not going to give up the Jew confetti system. It gives to much prosperity in every nation that has willing loyal slaves willing to use it as currency. Which is pretty much every nation on Earth. So good luck with your conversion plans. Hope that works out well for you.